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Aging can be harmful to an economy over the long run, as an increase in the share of the elderly population reduces both the labor force and output per adult, and increases the social security burden. Policy changes can partly offset the labor squeeze. Possible measures include increased female participation rates, increased flexibility of migration policies, and improved relevance and quality of technical and vocational training to reduce possible skills mismatch. Moreover, it is crucial to establish an efficient and sustainable elderly care system to meet the rising needs of the elderly.

The People’s Republic of China (PRC) has the largest elderly population and is one of the most rapidly aging countries in the world, leading a league of many Asian economies that face the challenge of population aging. The country previously benefited from a favorable age structure—the so-called “demographic dividend”—but slowing population growth and an aging population associated with a declining fertility rate and rising life expectancy are turning this dividend into a burden, both economically and socially.

Key Points

• Increasing female participation rates, increasing flexibility of migration policies, and improving relevance and quality of technical and vocational education and training to reduce skills mismatch could help offset the labor squeeze brought about by an aging population. The establishment of an efficient and sustainable elderly care system is also crucial in meeting the rising needs of the elderly.
• In the policy area, focus should be placed on (i) reforming the elderly care service subsidy scheme, (ii) establishing a standardized care needs assessment and clear standards on elderly care, and (iii) developing a human resources development strategy for care service managers and providers.